AFS Markets Blog: Midday 06/11/2026

• Meanwhile in markets, European equities are deep in the red this morning. Bonds are trading sideways, waiting for US markets to open and – you’d almost forget – the US labor market report;

• Let’s start by looking ahead to the US labor market report, which consensus estimates suggest will show continued stability. The unemployment rate is expected to hold steady at 4.2 percent, while payrolls are expected to have increased by 65k in October – in line with their average monthly gain throughout 2026. At that pace, payrolls growth remains broadly in line with, or even slightly above, most estimates of the breakeven level needed to keep the labor market steady. As a result, the labor market is likely to continue playing second fiddle to inflation for the Fed. However, don’t discount the release: with risk-off sentiment prevailing amid the AI trade sell-off, a weaker-than-expected print could still amplify market jitters;

• Shifting to the inflation side of things, the Cleveland Fed’s nowcast does not make for particularly happy reading. Core PCE inflation (the Fed’s favorite metric) is forecast to come in at 3.2 percent YoY in October – up from 3.1 percent in September – while the overall Q4 reading is now projected at 3.3 percent YoY – which would mark its highest level since 2023;

• Despite expectations of inflation picking up in the coming months, FOMC rate-hike expectations have started to fade. Just this morning, the board’s chief dove, NY Fed President John Williams, spent his time arguing that the energy shock is passing through the economy as expected and that, at this point, the Fed can afford to wait and gather more information. Clearly, he is in no rush to continue the Fed’s hiking cycle;

• For the December meeting, a 25bps hike remains the favored outcome with 18bps of tightening priced into Fed fund futures. Still, by the January meeting pricing only rises to a total of 22bps of hikes. It is only by the March FOMC meeting that Fed funds futures price in a full 25bps hike (and change). Looking further out, punters are no longer pricing in a second full hike in 2027, although further tightening remains the favored outcome with 42bps of hikes priced into the September 2027 Fed funds future;

• Shifting to broader market commentary, Brent crude has come off its highs, trading at $97 a barrel at pixel time. Overnight, there was some positive reporting that Iran was reviewing concrete proposals to limit its nuclear program, suggesting some progress in the negotiating process mediated by Qatar. However, President Trump met with his national security team yesterday to discuss not only diplomatic but military options, leaving his intentions as ambiguous as ever in interviews following the meeting. In equities, the Stoxx 50 is down a percent and a half at pixel time– trading six percent below its August highs. There is a bit of positive news: Nasdaq futures are up a percent this morning. But let’s not cheer too early. With UST yields still hovering near their lows, EURCHF trading close to its lows and Asian tech stocks having taken a beating this morning, we’ll have to wait and see whether the futures gains carry through to the cash market;

• Looking ahead, we’ll have to wait until 14:30 CET for the US labor market report to drop and 15:30 CET for the Nasdaq to open. Besides that, there is some Fed speak to keep an eye on. Next week, the key event is the US CPI release. Beyond that, there is relatively little on the agenda to get excited about

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